.............SPX/NDX Weakness Today As Expected
SPX (S & P 500) and NDX's (NASDAQ 100) countertrend Wave B upcycle since 8-16-07 probably peaked on Tuesday, see http://stockcharts.com/charts/gallery.html?%24spx. NDX's chart is similar to SPX's. SPX made a bearish breakaway gap from 1489.42 on Wednesday. However, a 2% follow through sell signal still hasn't occurred yet.
SPX's (S & P 500) anemic very short term Wave B type rebound from late Wednesday until mid session Thursday, see http://finance.yahoo.com/q/ta?s=%5Espx&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=, lended credence to the likelihood that the countertrend Wave B upcycle that began at 1370.60 on 8-16 peaked on Tuesday, see http://stockcharts.com/charts/gallery.html?%24spx.
The fact that SPX failed to do an Elliott Wave 12345 up down up down up pattern from late Wednesday until mid session Thursday (http://finance.yahoo.com/q/ta?s=%5Espx&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c==) was a clear sign that today was likely to bring a significant SPX/NDX decline.
If SPX (S & P 500) fails to fill today's upside gap at 1478.55 early next week, see http://finance.yahoo.com/q/ta?s=%5Espx&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=, which would make it a bearish breakaway gap, then that will confirm that Tuesday 9-4's cycle high was a countertrend Wave B cycle high.
The Fed added a massive $31.25 Billion in credit yesterday, see http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE, and, the fact that yesterday's SPX/NDX strength was relatively modest is a bad sign given the massive infusion of credit into "the system."
As discussed the previous three days, SPX and NDX's Wave B Elliott Wave count is deceptive, since they appear to have hit Wave 3 cycle highs on Tuesday 9-4 (up down up pattern on the daily chart since 8-16's SPX/NDX cycle lows), when in fact they're probably final Wave 5 cycle highs. The rally on 8-16 into 8-17 was probably Wave 1, 8-17/8-20's decline was Wave 2, which would make Tuesday's cycle high a third/final Wave 5 cycle high for SPX/NDX, see http://stockcharts.com/charts/gallery.html?%24spx.
This jives with the Technology Select Sector SPDR (XLK) having a clear Elliott Wave 12345 up down up down up pattern since bottoming on 8-16, see http://stockcharts.com/charts/gallery.html?xlk. Also, there's a bearish large spike on Tuesday's XLK candle.
Also, the WMT Lead Indicator is bearish recently, at +0.82% versus SPX (S & P 500) today/on 9-7, at +0.30% versus SPX (S & P 500) on 9-6, at -0.81% versus SPX (S & P 500) on 9-5, -1.81% on 9-4, -0.40% on 8-31, -1.55% on 8-30, -0.37% on 8-29, see http://finance.yahoo.com/q/ta?s=%5EHUI&t=5d&l=on&z=l&q=l&p=&a=m26-12-9,p12,fs,w14&c=wmt,%5EGSPC, which jives with SPX/NDX having entered Wave C of their major downcycle since the July cycle high at 1555.90.
Notice on the daily chart that UltraShort QQQ ProShares (QID) appears to have completed an Elliott Wave ABC down up down monthly downcycle on Tuesday, see chart 1 at http://stockcharts.com/charts/gallery.html?qid. I'll probably trade QID once I'm convinced that NDX has peaked. It's a similar technical situation to SPX's. NDX didn't hit a sell signal today. It needs to break it's Wave B uptrendline since 8-16 then follow through by 2%+ in order to hit a sell signal. I'll look to day trade QID or QLD on Monday.
If QID bottomed on Tuesday I'll probably wait for a short term Wave 2 downcycle before looking to buy with the intention of holding for a few sessions. It almost always makes sense to wait for a buy signal (the expected action, a strong multi day short term Wave 1 upcycle), then buy during a Wave 2 type pullback.
The dramatic Wave A downcycle from the July cycle high at 1555.90 to 8-16's cycle low at 1370.60 triggered a major 5% follow through sell signal, which indicates that an SPX (S & P 500) Cyclical Bear Market probably began in July after peaking at 1555.90, to see the major sell signal see chart 1 at http://www.joefrocks.com/GoldStockCharts.html.
Note that in the downcycle from the July cycle high at 1555.90 to Thursday 8-16's cycle low (http://stockcharts.com/charts/gallery.html?%5Espx) that the Wave B up of that downcycle lasted a grand total of only TWO DAYS, which is a clear indication that the downcycle from the July cycle high at 1555.90 to Thursday 8-16's cycle low is probably only a Wave A downcycle.
After Wave C downcycle bottoms THEN a respectable lengthy multi month intermediate term upcycle should occur for SPX.I'm pretty much abandoning the rockets trading strategy for now, but, I may daytrade rockets or do very modest rocket trading. In a healthy market/economy the rockets trading strategy may work very well, but, one should still probably trade baskets of stocks in a sector or index to get a good risk/reward ratio, and, to smooth out the uncertainty involved in trading individual stocks.
Broad based market indexes and sector indexes have much more predictable cycles and Elliott Wave patterns than individual stocks, because, the "uncertainties" (upside and downside surprises) of stocks in a given index will have a strong tendency to cancel/smooth out the uncertainty of the individual stock components. There will obviously be both upside and downside surprises for components in any index, that will tend to cancel/smooth out the uncertainty of timing that index, relative to timing an individual stock.
The best way to trade aggressively long is to trade volatile ETFs or a high relative strength basket of stocks of a sector or index (low relative strength for short selling).
I'm probably going to trade only index and sector ETFs for a few months, so, I'm not going to be discussing individual stocks, unless I trade a basket of stocks in a given sector, like I used to do in the previous Wave 1 HUI/XAU Cyclical Bull Market that ended on 5-11-06.
In this market especially, even if you're a daredevil, it makes a lot of sense to wait for a strong short term Wave 1 upcycle to trigger a monthly or intermediate term cycle buy signal, then look to buy late in a short term Wave 2 downcycle or early in Wave 3 up. Using cycle trendlines also makes a lot of sense. Usually at least one important trendline (important short term at least) will be broken before one should look to buy.
Often a bullish large inverse spike will occur when a cycle low occurs, which is a sign to look to go long. Conversely, often a bearish large spike will occur when a cycle high occurs, which is a sign to look to exit a long position.
Cycle trendlines/channels used in concert with Elliott Wave patterns and gaps are the basis/crux of "Trade the Cycles." "Gaps action" is very important.
If one decides to trade volatile stocks/ETFs obviously paper trade for a while or trade very modest positions at first.
As a long term multi-year investor in any stock, commodity, etc. you want to buy near the primary multi-year Secular Bull Market/very long term upcycle trendline. Gold's primary multi-year Secular Bull Market/very long term upcycle trendline is at $475ish right now, so, gold would be a great buy in the $475-500 range. When the vast majority of gold writers say it's a great time to buy or are bullish, as they almost always are, it's rarely a good time for long term investors to buy.
HUI/XAU's Wave 2 Cyclical Bear Market began 5-11-06, see charts 7 and 9 at http://www.joefrocks.com/GoldStockCharts.html. The primary Secular Bull Market trendlines since late 2000 are at 200-220 for HUI and at 85-90 for the XAU. Those are the targets for where the Cyclical Bear Market will bottom. NEM's Wave 2 Cyclical Bear Market began on 1-31-06. ....... http://www.JoeFRocks.com/ .
HUI NEM XAU
SPX's (S & P 500) anemic very short term Wave B type rebound from late Wednesday until mid session Thursday, see http://finance.yahoo.com/q/ta?s=%5Espx&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=, lended credence to the likelihood that the countertrend Wave B upcycle that began at 1370.60 on 8-16 peaked on Tuesday, see http://stockcharts.com/charts/gallery.html?%24spx.
The fact that SPX failed to do an Elliott Wave 12345 up down up down up pattern from late Wednesday until mid session Thursday (http://finance.yahoo.com/q/ta?s=%5Espx&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c==) was a clear sign that today was likely to bring a significant SPX/NDX decline.
If SPX (S & P 500) fails to fill today's upside gap at 1478.55 early next week, see http://finance.yahoo.com/q/ta?s=%5Espx&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=, which would make it a bearish breakaway gap, then that will confirm that Tuesday 9-4's cycle high was a countertrend Wave B cycle high.
The Fed added a massive $31.25 Billion in credit yesterday, see http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE, and, the fact that yesterday's SPX/NDX strength was relatively modest is a bad sign given the massive infusion of credit into "the system."
As discussed the previous three days, SPX and NDX's Wave B Elliott Wave count is deceptive, since they appear to have hit Wave 3 cycle highs on Tuesday 9-4 (up down up pattern on the daily chart since 8-16's SPX/NDX cycle lows), when in fact they're probably final Wave 5 cycle highs. The rally on 8-16 into 8-17 was probably Wave 1, 8-17/8-20's decline was Wave 2, which would make Tuesday's cycle high a third/final Wave 5 cycle high for SPX/NDX, see http://stockcharts.com/charts/gallery.html?%24spx.
This jives with the Technology Select Sector SPDR (XLK) having a clear Elliott Wave 12345 up down up down up pattern since bottoming on 8-16, see http://stockcharts.com/charts/gallery.html?xlk. Also, there's a bearish large spike on Tuesday's XLK candle.
Also, the WMT Lead Indicator is bearish recently, at +0.82% versus SPX (S & P 500) today/on 9-7, at +0.30% versus SPX (S & P 500) on 9-6, at -0.81% versus SPX (S & P 500) on 9-5, -1.81% on 9-4, -0.40% on 8-31, -1.55% on 8-30, -0.37% on 8-29, see http://finance.yahoo.com/q/ta?s=%5EHUI&t=5d&l=on&z=l&q=l&p=&a=m26-12-9,p12,fs,w14&c=wmt,%5EGSPC, which jives with SPX/NDX having entered Wave C of their major downcycle since the July cycle high at 1555.90.
Notice on the daily chart that UltraShort QQQ ProShares (QID) appears to have completed an Elliott Wave ABC down up down monthly downcycle on Tuesday, see chart 1 at http://stockcharts.com/charts/gallery.html?qid. I'll probably trade QID once I'm convinced that NDX has peaked. It's a similar technical situation to SPX's. NDX didn't hit a sell signal today. It needs to break it's Wave B uptrendline since 8-16 then follow through by 2%+ in order to hit a sell signal. I'll look to day trade QID or QLD on Monday.
If QID bottomed on Tuesday I'll probably wait for a short term Wave 2 downcycle before looking to buy with the intention of holding for a few sessions. It almost always makes sense to wait for a buy signal (the expected action, a strong multi day short term Wave 1 upcycle), then buy during a Wave 2 type pullback.
The dramatic Wave A downcycle from the July cycle high at 1555.90 to 8-16's cycle low at 1370.60 triggered a major 5% follow through sell signal, which indicates that an SPX (S & P 500) Cyclical Bear Market probably began in July after peaking at 1555.90, to see the major sell signal see chart 1 at http://www.joefrocks.com/GoldStockCharts.html.
Note that in the downcycle from the July cycle high at 1555.90 to Thursday 8-16's cycle low (http://stockcharts.com/charts/gallery.html?%5Espx) that the Wave B up of that downcycle lasted a grand total of only TWO DAYS, which is a clear indication that the downcycle from the July cycle high at 1555.90 to Thursday 8-16's cycle low is probably only a Wave A downcycle.
After Wave C downcycle bottoms THEN a respectable lengthy multi month intermediate term upcycle should occur for SPX.I'm pretty much abandoning the rockets trading strategy for now, but, I may daytrade rockets or do very modest rocket trading. In a healthy market/economy the rockets trading strategy may work very well, but, one should still probably trade baskets of stocks in a sector or index to get a good risk/reward ratio, and, to smooth out the uncertainty involved in trading individual stocks.
Broad based market indexes and sector indexes have much more predictable cycles and Elliott Wave patterns than individual stocks, because, the "uncertainties" (upside and downside surprises) of stocks in a given index will have a strong tendency to cancel/smooth out the uncertainty of the individual stock components. There will obviously be both upside and downside surprises for components in any index, that will tend to cancel/smooth out the uncertainty of timing that index, relative to timing an individual stock.
The best way to trade aggressively long is to trade volatile ETFs or a high relative strength basket of stocks of a sector or index (low relative strength for short selling).
I'm probably going to trade only index and sector ETFs for a few months, so, I'm not going to be discussing individual stocks, unless I trade a basket of stocks in a given sector, like I used to do in the previous Wave 1 HUI/XAU Cyclical Bull Market that ended on 5-11-06.
In this market especially, even if you're a daredevil, it makes a lot of sense to wait for a strong short term Wave 1 upcycle to trigger a monthly or intermediate term cycle buy signal, then look to buy late in a short term Wave 2 downcycle or early in Wave 3 up. Using cycle trendlines also makes a lot of sense. Usually at least one important trendline (important short term at least) will be broken before one should look to buy.
Often a bullish large inverse spike will occur when a cycle low occurs, which is a sign to look to go long. Conversely, often a bearish large spike will occur when a cycle high occurs, which is a sign to look to exit a long position.
Cycle trendlines/channels used in concert with Elliott Wave patterns and gaps are the basis/crux of "Trade the Cycles." "Gaps action" is very important.
If one decides to trade volatile stocks/ETFs obviously paper trade for a while or trade very modest positions at first.
As a long term multi-year investor in any stock, commodity, etc. you want to buy near the primary multi-year Secular Bull Market/very long term upcycle trendline. Gold's primary multi-year Secular Bull Market/very long term upcycle trendline is at $475ish right now, so, gold would be a great buy in the $475-500 range. When the vast majority of gold writers say it's a great time to buy or are bullish, as they almost always are, it's rarely a good time for long term investors to buy.
HUI/XAU's Wave 2 Cyclical Bear Market began 5-11-06, see charts 7 and 9 at http://www.joefrocks.com/GoldStockCharts.html. The primary Secular Bull Market trendlines since late 2000 are at 200-220 for HUI and at 85-90 for the XAU. Those are the targets for where the Cyclical Bear Market will bottom. NEM's Wave 2 Cyclical Bear Market began on 1-31-06. ....... http://www.JoeFRocks.com/ .
HUI NEM XAU
Labels: Gold, Gold Stocks, HUI, NEM, Silver, Silver Stocks, SPX, XAU
posted by Joe Ferrazzano at
1:12 PM
